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China manufacturing growth slows in February

The Chinese official Purchasing Managers Index (PMI) dipped to 50.1 in February from 50.4 in January primarily due to the impact of the government’s policies in the recent times.

A PMI of above 50 indicates an expansion in industrial activity, and below hints at contraction.

The output index declined to 50.2 in February from 50.3 in January, while the new orders index fell to 50.1 from 51.6 a month earlier.

Liu Ligang, an economist with ANZ, told the Financial Times (FT): “The recovery remains fragile and could falter as monetary policy conditions are tightened.”

Louis Kuijs, an economist at Royal Bank of Scotland, told FT: “The balance of consideration in the macro [economic] stance is shifting. We do expect the government to contain the overall credit expansion.”

A separate PMI, published by HSBC, showed that the country’s manufacturing PMI fell to 50.4 in February from 52.3 in January.

The country’s Lunar New Year holiday this year took place in February, while it happened in January last year. Economists, however, say that the holiday factor has less impact on the manufacturing activity.

In January, the People's Bank of China has withdrawn cash of $146bn (Rmb910bn) from the economy to neutralize an increase in financing by the country’s financial firms.

China’s economy recovered in the fourth quarter of 2012 due to rise in lending and government spending.

The PMI is a survey that measures sentiment rather than actual activity.